Netflix continues to hemorrhage customers and its stock price is reflecting these defections.
Per today’s Huffington Post,
“Netflix has lost 800,000 subscribers in the last three months, according to numbers released as part of the company’s third quarter financial report on Thursday. The streaming-and-DVD site is down to 23.8 million users as of September 30, 2011, compared to 24.6 million users on June 30, 2011.
The reason for the loss, per a letter to investors written by Netflix CEO Reed Hastings and CFO David Wells:
‘Our primary issue is many of our long-term members felt shocked by the pricing changes, and more of them have expressed that by canceling Netflix than we expected.’ “
Today’s Wall Street Journal reports,
“Investors reacted harshly. Netflix shares, which had already fallen 61% from their all-time high in mid-July, fell 26% more in after-hours trading Monday, following the quarterly report. The company’s market value has sunk to about $4.6 billion from more than $16 billion in the space of three months.
How is Mr. Hastings planning on recovering lost customers and revenue? According to the 8K they filed today, they plan the following:
- Keep the increased pricing of each $7.99/mo. streaming and $7.99/mo. DVD.
- Focus on the 43 LATAM countries they launched into just this past September.
- Expand into the UK and Ireland Q1 (current expansion in Canada has netted 1 million subscribers to date)
- Evaluate content offerings based on the number of times viewers watch each title and for how long (not on criteria such as whether a title has won an award or earned money at the box office).
- Implement a Netflix Facebook account integration strategy, so that users/viewers can advertise on behalf of Netflix (share what you watch).
- Re-launch the ‘Just for Kids’ webpage (done in July).
“There will be no promotions to bring back spurned subscribers, he said. ‘The focus is on bringing back our reputation and brand strength, but it won’t happen through grand gestures,” Mr. Hastings told analysts Monday.'” (quote from WSJ)
So there you have it. There is NO plan to recover anyone who has cancelled their service due to these ill-informed changes. Only an apology from Mr. Hastings, a letter to shareholders saying that they moved too fast (huh? since when does speed matter to customers?), a public statement from Mr. Hastings that the price increase remains and that there will be no ‘grand gestures’ to bring customers back.
But they DO plan to bring back their reputation and brand strength.
Uhhh… by doing what, you might ask? Expanding into non-US countries and not listening to the 800,000 paying customers that have already defected (sounds like customers are expendable)? By watching your stock sell off and price decline (sounds like shareholders are expendable)? And, just what IS your brand message/reputation, Mr. Hastings?
Dear Mr. Hastings (CEO) and Mr. Wells (CFO).
If ever there were a time for a “grand gesture” this would be it.
Dear Netflix competitors (Red Box, Time Warner Cable, etc.)… Netflix just gave you an early Christmas present. Have fun!!!
The case study continues…
© 2011 Mary Ann Markowicz